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> Money in the Bank? |
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Article kindly supplied by Mike Clarke, Property
Investor
Anyone
over the age of 30 will tell you that in order
to have money for retirement, be that early
or at the current age limit of 70 (yes that’s
right 70!), we have to start putting money away
in savings accounts or invest it so that we
will have something to live on when we decide
to give up working and retire. There is currently
a problem with that - interest rates!
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At the moment and for the foreseeable future, any money
sitting in a savings account with a bank or building
society will not earn much interestas rates are low.
The
best rate I came across whilst researching this article,
was
3.8% (from the company that uses British racing driver,
Lewis Hamilton in their TV adverts), and even at this
incredibly (!?) high rate, the product had many clauses
and minimum paying in levels that must be adhered to
in order to achieve the full rate.
Property
typically doubles in value every 10-12 years according
to the trends, even when there is a massive crash as
the market overstretches and suddenly appears to implode.
This is usually due to rapid increases in the valuations
of property such as housing, where unsustainable levels
are reached relative to incomes and other economic elements,
followed by a reduction in price levels.
Such
major corrections in the market are typically every
20 years or so and end up bringing property values back
to realistic levels. However, this time, the property
market did not implode due to an expected major correction.
In
2007, US banks realised that they had a liquidity problem
as they had been handing out lines of credit to lots
of people who were not in a position to be able to pay
it back. These debts were underwritten or sold on by
different institutions in an attempt to minimise the
impact on the banks trillion dollar shortfall in cash
reserves.
As
we are all aware, this did not work out exactly as planned,
it just spread the debt around. This affected many financial
institutions in various Countries and in the end, the
United States Government were forced to step in to bail
out their own banking system. It was still too little
too late for the global economy and we have all suffered
the consequences since.
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Many businesses, savers and private pension
funds, who had been counting on a healthy
return on workers hard earned cash, still
face a massive multi billion pound shortfall
in their funds initial financial predictions,
having lurched from one economic disaster
to another since 2007 including the collapse
of the Icelandic banks and the current Gulf
of Mexico BP oil disaster.
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So,
why risk leaving money in a bank? There are better
alternatives, even in the current economic climate.
Property
has always produced good returns for investors and
will continue to do so.
In
2009 there were encouraging signs of stabilization
in the UK property market, as prices began to rise
slowly month on month. However, the majority of Investors
remained on the sidelines waiting for firm evidence
that the market had turned and that the recovery was
real and sustainable, complaining about poor cashflow
or the lack of suitable Loan To Value mortgage products.
Successful
investors are those who are able to think outside
the box and who have the mindset to take action. They
have already discovered many additional ways to profit
from property. They are able to devise, adapt or accept
different methods and strategies to purchase or control
an asset whilst generating an income from it. They
have broken the hard pressed social conditioning behind
much of the way that property was traditionally purchased
and have generated wealth!
In
fact property values have increased 10.5% over the
last 12 months.
That
means if you were savvy enough to have bought property
in 2008, Congratulations! You have already made money
on it. So, if you are an Investor with a property
portfolio worth £1,000,000, congratulations
your properties are now worth £1,105,000. Thats
a
healthy increase of £105,000. Nice!
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Choosing
to invest in property is not for the faint hearted,
but it is for the enlightened! |
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